Ch 4 Exercises Flashcards
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
The fact that the issuer is a public company.
Yes, this should be included.
Provides readers with background information about the company’s position and insight into the accounting standards that it must follow.
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
The market value of the company’s stock on the date the program commences.
Yes, this should be included.
Knowing the market value of the stock at that time provides important financial information that is necessary to the upcoming transactions.
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
The anticipated size of the repurchase program, in dollars.
Yes, this should be included.
The size of the repurchase program is relevant financial information to the transaction.
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
The period over which the repurchase program is expected to occur.
Yes, this should be included.
Note the time period to ensure that the proper accounting guidance is being applied to the transaction.
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
Background on the company and its primary sources of revenue.
No, this should not be included.
It is not necessarily relevant to the transaction in question. Keep it concise.
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
The fact that the company entered into a similar transaction several years ago.
Yes, this should be included.
This may provide the company with a basis, determining if they should handle this transaction the same way or in a different way.
For each piece of information, state whether it should be included in, or excluded from the Facts section of an issues memo, assuming that the objective of the issues memo is to evaluate the accounting by a company for a repurchase of its own stock. Briefly explain your reasoning.
The name of the investment bank that will facilitate and manage the repurchase program.
Yes, this should be included.
All major parties involved in the transaction should be named so that readers understand how the transaction is taking place and who is involved.
